APRA published a letter by The Australian Securities and Investments Commission (ASIC) regarding preparations for the transition from London Interbank Offered Rate (LIBOR) to alternative benchmark rates. ASIC has written to the CEOs of several major Australian financial institutions regarding their preparations for the end of LIBOR. This initiative is strongly supported by APRA and the Reserve Bank of Australia (RBA).
LIBOR is used by many Australian financial institutions in their contracts and business processes. The UK FCA has stated that it will no longer use its powers to sustain LIBOR beyond 2021. This letter is aimed to help better understand how major Australian financial institutions are preparing to transition away from LIBOR to alternative benchmarks. ASIC, APRA, and the RBA are seeking assurance that the senior management in these institutions fully appreciates the impact and risks and is taking appropriate action ahead of the end of 2021. The financial regulators expect all institutions that rely on LIBOR to consider the impact of LIBOR transition on their business. Users of LIBOR should be aware of the size and nature of their exposures to LIBOR; put in place robust fall-back provisions in contracts referencing LIBOR; and be taking action to transition to alternative rates.
The letter states that the extent to which LIBOR may be embedded in a financial institution’s current business practices means the transition could be complex. The transition away from LIBOR may have significant implications on the entities’ risk management, operational processes and IT infrastructure. Insufficient preparations for the transition could have a negative impact on the entities’ business, clients, and the markets in which they operate.
Keywords: Asia Pacific, Australia, Banking, Securities, LIBOR, LIBOR Alternatives, OTC Derivatives, ASIC, RBA, APRA
Previous ArticleECB Publishes Paper on Its Macro-Prudential Policy Framework
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.